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Monday, May 27, 2013

#5 Article: "Fragile-Handle with Care"

Tremendous performance by Nifty last month!! Last Month issue i did mention to go long with targets of 6045/6150 on Nifty and we achieved it with no stoppage. But now nifty is packed up with a box and its delivered with sign "Fragile-handle with Care". Bank Nifty was surely the outperforming index as intimated in my last month issue. Now its time we may see some profit booking ahead. We might not see some vigorous downside but we may seem some range bound movement of nifty between the range of 5855-6350.

RBI's rate cut anticipation was the reason for the nifty's start up run while rate cut on 3rd May bought more fuel to run up nifty chart. Even the inflation and WPI had improved in favour of the economy which got investors into much of confidence. But we are still not full recovered from crisis. Talking about global markets, they all are inching up at the life time high. US had jumped up on better employment numbers but a bloomberg issue mentioned that bureau of labour statistics in US had said that employment at real level hasnt inched up as suggested by numbers. Ofcourse number arent manipulated but they show only the educated class of labour where as the uneducated which accounts for major chunk of employment in US is not considered fully. Employment of lower class profiles has not picked up and many labors are facing problem for their living. So yet we cannot say that US markets have fully recovered from 2008 crisis though their financial market depict it. US companies have announced good set of numbers this quarter which was the strong base for the move along with numbers. Talking about Europe indices, they are urging up but their economies are at the state of double recession. Nothing have improved much in europe but they are driving themselves along with their western counterparts. Nor Industrial production nor employment have improved in Europe. China on other hand have halted imports of base metals as their are experiencing a slowdown. China's is facing problem of shadow loans (which is unregulated loans) which is accounting for almost 200% of GDP while regulated loans are just mere 30% of GDP. Due to strict formalities even local government have relied upon shadow loans. If the slowdown continues than this could be another bubble like in that of US. Japan had also devalued their currency for the first time which was the only reason for upmove in the financial market index, where as fundamentally their economy has not recovered from Tsunami crisis. So we could conclude that fundamentally still all the economies need strong reason to be considered recovered.

Coming to technical's on Nifty chart,we have
seen some bearish characteristics last week. After a rally upto 6230, we saw a
Bearish engulfing pattern on weekly chart as seen on the attached graph. This
pattern is considered to be bearish sign on the top and we were on the top when
this occured on the chart. But taking into elliot wave, nifty has already
retraced 38.2% from the top with respective to last third wave rally. It
suggest consolidation phase on the chart. All the indicators are in no-man land
suggesting the move either way. Secular trend is ofcourse bullish on monthly
chart but daily and weekly are suggesting some profit booking with is in-line
with fundamental view. That’s why I meant that nifty is fragile at the moment
and could go long way but on either side. Our strategy on nifty would be wait
and watch and take position on either side of range 5855-6118. I expect
commodity stocks to outperform next month and my picks would be TaTa Steel,
JSWSteel, Coal India and Ster.

Note: All the data and
graph is as of 27h May 2013 closing

Disclaimer: I may have
personal position in index and above mentioned stocks. Views and News mentioned
above may have Errors and omissions. My views are biased more towards technical
analysis. Please read and study the market carefully before investing on my
idea. For any suggestion contact me on my email. Some words mentioned in article
don’t mean their actual meaning. They are correlated for market.